Will the Health Crisis Drive a Suburban Revival?
The requirements of physical distancing, spending more time at home and an aversion to mass transit may have pushed the migration to the suburbs to a tipping point, spurring an accelerated shift in demand for suburban office space and apartments.
The last decade brought a wave of urbanization, largely driven by the 72 million millennials who were predominantly in the early-career stages of their 20s. The live/work/play concept was popular as young professionals enjoyed the amenities of the urban core while often sacrificing living space. Given the rich experiences of a downtown lifestyle, many millennials saw their home as little more than a place to sleep and were willing to live in smaller spaces, often with roommates. Companies adapted, favoring offices in downtown skyrises to attract young professionals while utilizing formats that significantly reduced the office space per employee.
With more than 60 percent of millennials now in their 30s, housing and office space demand have steadily shifted to the suburbs. Many millennials have begun to form families, enhancing their appreciation of suburban amenities such as increased living space and stronger school systems. Since peaking at 7.4 percent at the beginning of 2010, suburban apartment vacancy rates have fallen 350 basis points to 3.9 percent, slightly above the average vacancy rate of downtown apartments. Demographics already pointed to an acceleration of the migration trend, but the health crisis will likely deliver a significant boost.